Valuating brand equity and product-related attributes in the context of the German automobile market

Abstract

The concept of consumer-based brand equity has been discussed extensively in the literature and there are a wide variety of both quantitative and qualitative measures used to assess it. For the most part, previous research has studied the way brand and product attributes are perceived in a consumer's mind and the empirical data used in most studies is based on self-reported survey data. In this research, objective data from the largest German Automobile Association, including actual prices, objective quality ratings of product attributes and market share of brands, are used to estimate their effect on the actual price set by the manufacturer and paid by consumers for those automobiles in Germany. By conducting multiple hedonic regressions, we are able to explain the actual price of a car on the basis of its product attributes, brand and the market share of that brand. Our results show that five out of the eight product attribute categories used in this research (chassis, interior, comfort, engine and safety) influence the price paid by consumers. In addition, when brand dummy variables are added to the model, the explanatory power of the proposed model increases. The paper also shows that product variety is positively related and market share negatively related to the price. Therefore, this paper provides an important contribution to existing literature on modelling and measuring the effect of product-related attributes, market share and especially brand equity on price. Further, it provides important managerial insight, as it shows how different product attributes are valued by consumers. In addition, the proposed model can be used by automotive manufacturers to approximate the price of existing and new automobiles.